Editor’s Note: This post was originally published on Seattle 2.0, and imported to GeekWire as part of our acquisition of Seattle 2.0 and its archival content. For more background, see this post.
By Matt Hulett
The Startup Whisperer is tracking four early stage companies over the coming weeks. These companies are all early stage (Series B or lower). I continually hear from VCs that good companies are still going to get funded. Trevor Oelschig from Bessemer Ventures (invested in local Seattle companies like Smilebox and PureNetworks which sold to Cisco) stopped by the Mpire offices recently and said that their firm is actually investing more than ever in seed to Series A stage companies.
Yet, one of our Mpire/WidgetBucks Board members, Rob Solomon, who recently joined the late stage venture capital firm, Technology Crossover Ventures, told me that really good companies in the Valley are having a hard time raising money. This topic has been reported on considerably in the press and across the blogosphere but I thought it would be interesting to track local, Seattle-area companies.
Ultimately, the message that I get from entrepreneurs is that it’s very tough out there. I really appreciate the honesty of these four companies that submitted some very detailed information about their progress. The will remain anonymous (until each CEO wants me to unveil their progress). This is not a representative sample size but it should act as a folksy proxy on the state of venture financings. Here are some findings:
Profile Company Background
- 3 companies are raising money now (2 Series A’s, 1 angel)
- 1 company is raising money in the coming months (Series B)
- Of the Series A companies that are raising money now, they have talked to approximately 20 VCS since they started fund-raising (14 in October alone), and they have received 10 ‘no’s. Both Series A companies looking for $3-$4M in new capital, and it’s important to note that the firm that has talked to 20 VCs is already close to one term sheet as of the posting of this blog. It is going to be exciting to track progress here. The other angel company have received a couple of checks already and not many no’s. Remember, angel financing is more about finding lots of investors paying smaller increments.
Here are some interesting takeaways from these CEOs:
- ”I think traction drives the whole thing. If you don’t have a real product and real customers and a real business model, it would be shocking to raise VC funds now unless you have an A++ team.”
- “It is pretty bad. All the rumors flying around are pretty true – investors getting nervous, staying close to home, not looking at new deals, etc.”
- “Just started in earnest on Tuesday with a small group of Angels. Went well resulting in a few writing checks in the following 48 hours.”
- “It’s rough but it seems like deals are still getting done. What we’re hearing/feeling are investors (mostly angels at this point) talking about how dicey times are and how we need to be hunkering down and how valuations are coming way down and … They’re then offering to put money in (in some cases) at pretty onerous terms (compared to what we would have seen a year ago). Real sales and revenue are required in any case. That’s what’s saving us at this point. In the last 2 weeks we’ve closed a few deals with Microsoft, AT&T Wireless, and Palm (all confidential) via their agencies. That traction is what’s getting investors interested along with the tech and market opportunities”
- “…it’s all about sales and revenue. We’re able to show our top-line ramping (albeit from a very low base) due to sales inside of F1000 companies at healthy price points (five figures).In addition, our burn is relatively low so investors are looking at that and seeing a path to profitability even if we fail to raise a big chunk of money in the next 12 months. That’s still the plan but our plan B isn’t to go out of business which investors like I think.”
